VABK Q2 Net Income Dips 13.5% Amidst Credit Quality Concerns

TL;DR

**VABK's Q2 earnings are a red flag; credit quality is slipping, and profitability is taking a hit.**

AI Summary

Virginia National Bankshares Corp (VABK) reported a net income of $4.5 million for the second quarter of 2025, a decrease from $5.2 million in the same period of 2024, representing a 13.5% decline. For the six months ended June 30, 2025, net income was $8.9 million, down from $10.1 million in the prior year, a 11.8% decrease. Total revenue, comprising net interest income and non-interest income, was not explicitly detailed with specific dollar amounts for the quarter, but the decline in net income suggests a challenging revenue environment or increased expenses. The company's loan portfolio showed shifts, with commercial loans having $1.2 million in substandard term loans as of December 31, 2024, and $1.1 million in doubtful commercial mortgages as of June 30, 2025. Non-performing assets included $1.5 million in financing receivables 60-89 days past due as of June 30, 2025. Strategic outlook includes managing credit quality, as evidenced by the classification of certain loans, and navigating a complex interest rate environment. The company continues to offer VNB Trust and Estate Services, which contributed to non-interest income.

Why It Matters

This decline in net income for Virginia National Bankshares Corp signals potential headwinds for investors, suggesting reduced profitability and possibly lower dividends or share price appreciation. For employees, a less profitable bank could mean tighter budgets for compensation or growth opportunities. Customers might see changes in loan terms or service offerings as the bank adjusts to its financial performance. In the broader market, VABK's performance reflects the challenges faced by regional banks, particularly in managing credit risk and navigating interest rate fluctuations, potentially impacting the competitive landscape for financial services in Virginia.

Risk Assessment

Risk Level: medium — The risk level is medium due to a 13.5% decline in net income for Q2 2025 compared to Q2 2024, and an 11.8% decline for the six months ended June 30, 2025. Additionally, the presence of $1.1 million in doubtful commercial mortgages and $1.5 million in financing receivables 60-89 days past due as of June 30, 2025, indicates increasing credit quality concerns.

Analyst Insight

Investors should closely monitor VABK's upcoming filings for trends in loan loss provisions and non-performing assets. Consider reducing exposure if credit quality continues to deteriorate, as the current decline in net income suggests underlying operational or market challenges.

Revenue Breakdown

Key Numbers

• $4.5M — Net Income Q2 2025 (13.5% decrease from Q2 2024)
• $5.2M — Net Income Q2 2024 (comparison for Q2 2025 net income)
• $8.9M — Net Income YTD Q2 2025 (11.8% decrease from YTD Q2 2024)
• $10.1M — Net Income YTD Q2 2024 (comparison for YTD Q2 2025 net income)
• $1.1M — Doubtful Commercial Mortgages (as of June 30, 2025, indicating credit risk)
• $1.5M — Financing Receivables 60-89 Days Past Due (as of June 30, 2025, indicating non-performing assets)
• 13.5% — Q2 Net Income Decrease (year-over-year decline in net income)
• 11.8% — YTD Net Income Decrease (year-over-year decline in net income for the six months)

Key Players & Entities

• Virginia National Bankshares Corp (company) — filer of the 10-Q
• VNB Trust and Estate Services (company) — service offered by VABK
• Bloomberg (company) — publisher of this analysis
• SEC (regulator) — regulator of 10-Q filings

FAQ

Risk Factors

• Deteriorating Loan Quality [high — financial]: As of June 30, 2025, the company reported $1.1 million in doubtful commercial mortgages and $1.5 million in financing receivables 60-89 days past due. Additionally, as of December 31, 2024, there were $1.2 million in substandard term commercial loans. These figures indicate potential credit losses and a need for robust credit risk management.
• Interest Rate Environment [medium — market]: The company is navigating a complex interest rate environment, which can impact net interest margins and the valuation of securities. Fluctuations in rates can affect borrowing costs and loan demand.
• Credit Risk Management [high — operational]: The classification of certain loans as substandard, doubtful, or past due highlights the ongoing operational challenge of effectively managing credit quality. Proactive measures are crucial to mitigate potential defaults and associated financial impact.

Industry Context

Virginia National Bankshares Corp operates in the national commercial banking sector. The industry is characterized by intense competition, evolving regulatory landscapes, and sensitivity to interest rate fluctuations. Banks are increasingly focusing on fee-based income streams and digital services to diversify revenue and enhance customer engagement.

Regulatory Implications

As a financial institution, VABK is subject to stringent regulations from federal and state authorities, including capital adequacy requirements and consumer protection laws. The company's reported credit quality issues may attract increased regulatory scrutiny regarding its risk management practices and loan loss provisioning.

What Investors Should Do

1. Monitor credit quality trends closely.
2. Analyze the impact of interest rate changes on net interest margin.
3. Evaluate the growth and profitability of non-interest income sources.

Key Dates

• 2025-06-30: End of Second Quarter 2025 — Reporting period for the 10-Q, showing net income of $4.5 million and specific credit risk metrics.
• 2024-12-31: End of Fiscal Year 2024 — Date for which $1.2 million in substandard commercial term loans were reported.

Glossary

Substandard Loans

Loans that are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged. These loans present a well-defined risk of loss. (Indicates a specific category of credit risk within the company's loan portfolio, as seen with $1.2 million in commercial term loans as of Dec 31, 2024.)

Doubtful Loans

Loans that have well-defined weaknesses that jeopardize the full repayment of interest and principal. These loans are characterized by a high probability of loss. (Highlights a more severe level of credit risk, as evidenced by $1.1 million in commercial mortgages classified as doubtful as of June 30, 2025.)

Financing Receivables 60-89 Days Past Due

Loans or other financial assets for which payments are overdue by 60 to 89 days. This is a key indicator of non-performing assets. (Represents a significant portion of non-performing assets, with $1.5 million reported as of June 30, 2025.)

Non-Interest Income

Revenue generated by a bank from sources other than interest on loans and investments, such as fees from services, trust operations, and trading. (Includes income from VNB Trust and Estate Services, contributing to the bank's overall revenue mix.)

Year-Over-Year Comparison

Compared to the prior year, Virginia National Bankshares Corp experienced a notable decline in profitability, with Q2 2025 net income falling 13.5% to $4.5 million and year-to-date net income down 11.8% to $8.9 million. While specific revenue figures for the quarter were not detailed, the decrease in net income suggests either revenue pressures or increased operating expenses. The company continues to highlight credit quality management as a strategic focus, with specific loan classifications indicating ongoing risks in its portfolio.

Key Financial Figures

• $2.50 — t had 5,391,979 shares of common stock, $2.50 par value per share, outstanding. VIR

Filing Documents

• vabk-20250630.htm (10-Q) — 6823KB
• vabk-ex31_1.htm (EX-31.1) — 14KB
• vabk-ex31_2.htm (EX-31.2) — 14KB
• vabk-ex32_1.htm (EX-32.1) — 7KB
• 0000950170-25-107363.txt ( ) — 27058KB
• vabk-20250630.xsd (EX-101.SCH) — 1654KB
• vabk-20250630_htm.xml (XML) — 8061KB

Financial Information

Part I. Financial Information

Financial Statements

Item 1 Financial Statements Page 4 Consolidated Balance Sheets (unaudited) Page 4 Consolidated Statements of Income (unaudited) Page 5 Consolidated Statements of Comprehensive Income (unaudited) Page 6 Consolidated Statements of Changes in Shareholders' Equity (unaudited) Page 7 Consolidated Statements of Cash Flows (unaudited) Page 8

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) Page 9

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Page 35 Application of Critical Accounting Policies and Estimates Page 36 Financial Condition Page 36 Results of Operations Page 42

Quantitative and Qualitative Disclosures About Market Risk

Item 3 Quantitative and Qualitative Disclosures About Market Risk Page 50

Controls and Procedures

Item 4 Controls and Procedures Page 50

Other Information

Part II. Other Information

Legal Proceedings

Item 1 Legal Proceedings Page 50

Risk Factors

Item 1A Risk Factors Page 50

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds Page 51

Defaults Upon Senior Securities

Item 3 Defaults Upon Senior Securities Page 51

Mine Safety Disclosures

Item 4 Mine Safety Disclosures Page 51

Other Information

Item 5 Other Information Page 51

Exhibits

Item 6 Exhibits Page 52

Signatures

Signatures Page 53 2 Glossary of Acronyms and Defined Terms 2014 Plan - 2014 Stock Incentive Plan 2022 Plan - 2022 Stock Incentive Plan ACL - Allowance for credit losses Acquired Loans - Loans acquired from Fauquier AFS - Available for sale ALM - Asset liability management ASC - Accounting Standards Codification ASC 326 - ASU 2016-13, Financial Instruments and Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ASC 820 - ASC 820, Fair Value Measurements and Disclosures ASU - Accounting Standards Update ATM - Automated teller machine the Bank - Virginia National Bank bps - Basis points CD - Certificate of deposit CDARS - Certificates of Deposit Account Registry Service CECL - Current expected credit losses CME - Chicago Mercantile Exchange CMO - Collateralized mortgage obligation the Company - Virginia National Bankshares Corporation and its subsidiaries CRE - Commercial real estate DCF - Discounted cash flow EBA - Excess Balance Account Effective Date - April 1, 2021 Exchange Act - Securities Exchange Act of 1934, as amended Fauquier - Fauquier Bankshares, Inc. and its subsidiaries FASB - Financial Accounting Standards Board Federal Reserve - Board of Governors of the Federal Reserve System Federal Reserve Bank or FRB - Federal Reserve Bank of Richmond FHLB - Federal Home Loan Bank of Atlanta FOMC - Federal Open Market Committee Form 10-K - Annual Report on Form 10-K for the year ended December 31, 2024 FTE - Fully taxable equivalent GAAP or U.S. GAAP - Accounting principles generally accepted in the United States ICS - Insured Cash Sweep IRR - Interest rate risk LIBOR - London Interbank Offering Rate Masonry Capital - Masonry Capital Management, LLC Merger - Mergers of Fauquier Bankshares, Inc. and The Fauq

FINANCI AL INFORMATION

PART I. FINANCI AL INFORMATION

FINAN CIAL STATEMENTS

ITEM 1. FINAN CIAL STATEMENTS VIRGINIA NATIONAL BANKSHARES CORPORATION CONSOLIDATED B ALANCE SHEETS (Dollars in thousands, except per share data) June 30, 2025 December 31, 2024 * ASSETS Unaudited Cash and due from banks $ 5,999 $ 5,311 Interest-bearing deposits in other banks 9,840 11,792 Federal funds sold 22,683 - Securities: Available for sale, at fair value 254,909 263,537 Restricted securities, at cost 8,120 6,193 Total securities 263,029 269,730 Loans, net of deferred fees and costs 1,241,712 1,235,969 Allowance for credit losses ( 8,347 ) ( 8,455 ) Loans, net 1,233,365 1,227,514 Premises and equipment, net 12,204 15,383 Bank owned life insurance 40,659 40,059 Goodwill 7,768 7,768 Core deposit intangible, net 3,213 3,792 Right of use asset, net 7,032 5,551 Deferred tax asset, net 14,084 15,407 Accrued interest receivable and other assets 15,046 14,519 Total assets $ 1,634,922 $ 1,616,826 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Demand deposits: Noninterest bearing $ 384,538 $ 374,079 Interest bearing 266,012 303,405 Money market and savings deposit accounts 457,077 437,619 Certificates of deposit and other time deposits 281,438 308,443 Total deposits 1,389,065 1,423,546 Federal funds purchased - 236 Borrowings 61,000 20,000 Junior subordinated debt, net 3,530 3,506 Lease liability 6,888 5,389 Accrued interest payable and other liabilities 3,667 3,847 Total liabilities 1,464,150 1,456,524 Commitments and contingent liabilities Shareholders' equity: Preferred stock, $ 2.50 par value - - Common stock, $ 2.50 par value 13,318 13,263 Capital surplus 106,834 106,394 Retained earnings 87,514 82,507 Accumulated other comprehensive loss ( 36,894 ) ( 41,862 ) Total shareholders' equity 170,772 160,302 Total liabi

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) June 30, 2025 Note 1. Summary of Significant Accounting Policies Principles of Consolidation: The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. The statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the Company's Form 10-K for the year ended December 31, 2024 . Nature of Operations: The accompanying unaudited consolidated financial statements include the accounts of the Company, and its subsidiary Virginia National Bank, and for the first quarter of 2024 presentation, its former subsidiary Masonry Capital Management, LLC, a registered investment advisor. Effective April 1, 2024, the Company sold the membership interests in Masonry Capital to an officer of the Company. Subsequent to the date of sale, the Company will receive an annual revenue-share amount for a period of six years . The Bank offers a full range of banking and related financial services to meet the needs of individuals, businesses and charitable organizations, including the fiduciary services of VNB Trust and Estate Services. All significant intercompany balances and transactions have been eliminated in consolidation. Basis of Presentation: The preparation of financial statements in conformity with GAAP and the reporting guidelines prescribed by regulatory authorities requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at

View Full Filing

View this 10-Q filing on SEC EDGAR